The company’s capital expenditure plan for next year, pending approval by the company’s board of directors, is set at 1.1 trillion ($18 billion), down from a projected spend of 1.32 trillion ($21 billion) for this year and a record 1.8 trillion ($29 billion) in 2018.
Gazprom was spending a lot in recent years, with the bulk of investment going towards the development of its three major export projects: Power of Siberia, Turkish Stream (aka TurkStream) and Nord Stream 2. Work on these projects is now winding down, freeing up some capital, bne Intellinews wrote.
The $55 billion Power of Siberia pipeline began pumping gas to China earlier this month, while the $8 billion TurkStream to Turkey is targeted for launch in January. However, there may be some delays to TurkStream as Russian President Vladimir Putin claimed at the start of December that Bulgaria is under “international pressure” to delay the pipeline project, while section via neighbouring Serbia is nearly finished.
The $11 billion Nord Stream 2 is also nearing completion, but is not expected to start up until mid-2020 because of earlier permitting delays in Denmark.
Signaling its greater focus on capital discipline, Gazprom’s management earlier this year pledged to increase dividends to 50% of net profits by 2021, triggering a rally in the company’s share price. They endorsed a plan on December 12 to increase dividends to 30% of income in 2019, following by 40% in 2020 and 50% in 2021 and beyond.
Shareholders still risk seeing their returns shrink, however, as Gazprom struggles to defend its market share in Europe from soaring LNG imports.
The company saw net profits slump 45% y/y in the quarter ending September 30 to 212 billion ($3.3 billion), after European gas prices fell to their lowest level in 15 years. Gazprom’s shipments to Europe fell to 171.4 bcm in the first nine months of 2019, from 185.4 bcm a year earlier, while average prices dipped to $222 per 1,000 cubic metres, from $233.